Climate Change

Stabilizing greenhouse gas (GHG) concentrations in the atmosphere at levels generally accepted to minimize the effects of climate change1 will not be achieved by holding current emission levels steady. It can only be achieved by significantly and continuously reducing GHG emissions over a period of decades. Reducing emissions by the amount required calls for an integrated approach – a partnership of all stakeholders, including the automotive industry, the fuel industry, government and consumers.

We are committed to doing our part to achieve climate stabilization. This will require significant increases in vehicle fuel economy globally, as well as the development of lower-carbon fuels.

Ford has spent more than three years creating a CO2 reduction model and studying a range of potential scenarios addressing how light-duty transport could contribute to meeting 450 ppm to 550 ppm stabilization pathways. The model was created to look at boundary conditions, including costs, and explore assumption sensitivities around vehicle technologies, baseline fuels, biofuels and consumers. The model is not intended to provide "the answer," but rather information on a range of possible solutions. We then queried the model under a number of different scenarios – such as what might happen under another 9/11-type attack or Hurricane Katrina petroleum supply disruption – to understand the robustness of various vehicle and fuel technology solutions.

Based on this analysis, Ford is targeting a 30 percent reduction in U.S. and EU new vehicle CO2 emissions, relative to the 2006 model year baseline, by 2020. This target is aligned with a 500 ppm stabilization pathway. If fuel providers, consumers and governments deliver their contributions, reaching a 450 ppm stabilization pathway for the light-duty transportation sector is possible. The 30 percent reduction target is also aligned with the new U.S. Corporate Average Fuel Economy legislation and represents an equitable contribution toward reducing CO2 emissions. (In fact, no other industry is being asked to achieve this level of reduction.) We recognize that future developments in technologies, markets, political expectations and even the natural manifestations of climate change are all uncertain. Accordingly, we will continue to monitor and adjust the target based on changing conditions.

Also in 2007, we mapped out a blueprint for sustainability – a plan of actions through the year 2030 designed to meet the target. We continued to reduce CO2 emissions from our operations. And, we joined the U.S. Climate Action Partnership (USCAP), a multi-stakeholder group that is advocating for comprehensive U.S. legislation aimed at achieving significant economy-wide cuts in greenhouse gas emissions. As a member of USCAP, we support the prompt enactment of national legislation to achieve short-, mid- and long-term targets, including an emission target zone aimed at reducing emissions by 60 to 80 percent from current levels by 2050. The USCAP target zone is consistent with stabilizing GHG concentrations at a level between 450 ppm and 550 ppm as well as the CO2 reduction modeling that we have conducted.

This section of our report discusses the risks and opportunities that climate change poses for our Company, our product CO2 strategy in the context of our broader approach to climate change and our participation in climate change public policy development.